U.S. restaurants should gear up for a financial hit from the coronavirus, Guggenheim Securities warns.
On Monday, Guggenheim Securities slashed its sales outlooks across the board for the U.S. restaurant industry citing the rising risk of the coronavirus keeping U.S. diners at home. The investment bank sees fast food and quick casual brands experiencing 0.9% and 0.2% “domestic [sales] slowdowns” in the first quarter. Full-service restaurant sales are expected to get hit by 1.3% in the quarter.
“Our outlooks now assume a retrenchment in domestic consumer demand in March & April with a return to"normal" behavior in late spring. We view this trajectory as practical but not overly conservative. While near-term demand lacks visibility and consensus outlooks will likely follow us down, we continue to view COVID-19 impact to demand as transitory and maintain our investment opinions based on underlying fundamentals and long-term outlooks,” writes DiFrisco.
The S&P 500 Restaurant Index has only dropped 7.1% year-to-date, outperforming the S&P 500 for the better part of 2020. Investors have stayed long in the space on the view — which is now petering out — that the U.S. wouldn’t be hit too hard from the coronavirus. With that now proving to be folly, the restaurant index has collapsed in March and has lagged the S&P 500.
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